Gamefly has filed a complaint with the Postal Regulatory Commission accusing …

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Gamefly is a popular way for gamers to play titles without having to buy $50 or $60 games. It works just like any mail-based rental service: you subscribe, choose the number of games you'd like to rent each month, keep them from however long you'd like, and then send them back once you're done. When Gamefly receives the games, it mails out the next one on the list. According to a recent complaint filed by Gamefly against the Postal Regulatory Commission however, mailing games remains dangerous, and expensive. That is, unless you're Netflix or Blockbuster.

According to Gamefly's numbers, it mails out 590,000 games and receives 510,000 games back from subscribers a month. The company sees, depending on the mailer, between one and two percent of its games broken in transit. "Testing by GameFly and Postal Service personnel has revealed that breakage occurs during the processing of DVD mailers on Postal Service automated mail processing equipment," Gamefly states.

Even if you assume the number is one percent, and a game costs $50 to replace, that's an astounding $295,000 a month in lost merchandise. As the company grows—and the complaint claims 34 percent yearly growth—that number will only get grow with it.

That's not the only issue— games are also stolen in transit, which has lead to the arrest of 19 Postal Service employees.

After testing multiple solutions, Gamefly saw the best results with a protective insert in the standard-sized mailer, which made the cost of shipping approximately double. Did that help? "...the Postal Service failed to stop breaking GameFly DVDs despite collecting the higher rates charged for flat-shaped First-Class Mail, and even after GameFly began marking its mailers with warnings such as 'FIRST-CLASS MAIL FLAT' and 'PROCESS ON AFSM-100,' the complaint alleges.

Netflix, Blockbuster given better treatment?

While some amount of theft and breakage is to be expected, Gamefly claims it has tried working with the Post Office to reduce the problems, to no avail. Further, the "solutions" still lead to broken discs, even with a significant increase in the cost of postage. Gamefly claims that mailers from Netflix and Blockbuster are treated better than their own product.

"On routine visits to multiple Postal Service facilities, GameFly’s employees have observed that a large percentage of mail pieces from Netflix and Blockbuster are culled from the automated letter processing stream," the complaint states. "GameFly has asked the Postal Service to give GameFly’s DVD mailers processing on terms and conditions comparable to the terms and conditions offered to two larger DVD mailers, Blockbuster and Netflix. The Postal Service has not done so."

Now that Blockbuster has began to offer video games for rental through its mailing service, a large problem has been created for Gamefly. "As a result of this initiative, GameFly now faces direct competition from a rival that is larger and longer established and which, because of the preferential treatment given by the Postal Service, enjoys a substantial cost advantage in the distribution of its DVDs to consumers."

Another success story for the US Postal Service?

Gamefly's complaints are pretty basic: its mailers aren't given the same preferential treatment as its competitors, and it pays for flat-rate postage, but the mailers aren't sorted on the correct equipment, leading to breakage. USPS employees steal the games. The complaint details every attempt the company has made to work with the Postal Service to resolve these complaints, or to get the same treatment given to Netflix and Blockbuster, and it claims those attempts have lead nowhere.

What's even more galling is that the Postal Service sent out a press release when Gamefly opened its new distribution center in Austin Texas, touting the use of the mail to help businesses grow. "GameFly may be a relatively new company, but it's using an old idea; getting USPS to help it grow," the release stated. "Company founders modeled the video game rental company on Netflix, the movie rental-by-mail mogul."

Gamefly says "movie rental-by-mail moguls" are getting better treatment. We've contacted both Gamefly and the United States Postal Service for comment on the complaint, but have yet to receive a reply. We'll update when we hear back from them.